We knew this day was coming. Now, it’s here.
The IMF has confirmed that China is now the world’s largest economy, as measured in terms of GDP (using purchasing power parity, which means adjusting for cost of living).
How is this related to Venezuela, you ask? Well, let’s just say this is related … to everything.
I think back at the roadtrip Quico and I took to Guárico, at our indignation at watching the Chinese flag waving in a workers’ camp in the middle of the Llanos.
The conquest … is now complete. The Chinese century is definitely here. The world’s most powerful economy is also the world’s most populated place – and chances are, the people there aren’t free enough to read this blog.
Just let that marinate for a while.
(HT: Huffington Post)
Caracas Chronicles 
and per capita measures matter not?
2013 GDP per capita (current US$)
– China: 6,807
– USA: 53,143
or perhaps in energy consumption per capita?
2011 Energy use per capita (kg of oil equivalent)
– China: 2,029
– USA: 7,032
#justsayin
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Per capita measures matter some, but this is a highly significant event.
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agreed. but let’s not get our panties up in a bunch just yet.
when the average chinese citizen has two cars, then we should ALL freak out. en masse.
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They don’t need two cars.
They have public transportation systems that actually work.
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it seems irrelevant for the purposes of comparing size… in both measures of GDP and energy consumption per capita I suspect Norway would put the US and China to shame, but nobody’s claiming they’re some sort of force to be reckoned with.
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I think you need to check out “the world’s longest traffic jam”. Makes a power outage in Caracas look like a quick commute.
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Nah c’mon, Juan, GDP comparisons made on PPP are “de mentirita.”
What it really means is something like “IMF has announced that within China, China’s $8 trillion GDP has more purchasing power than the US’s $16 billion GDP has within the US.”
From that to “China has the world’s biggest economy” it’s quite a stretch.
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You can quibble with what the PPP is measuring or not, but the fact remains that this particular line has been crossed. For the record, I don’t think it’s irrelevant.
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Quibble? Last time I checked, 16 was still > 8…
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OK, the actual numbers are these: “the U.S. economy still dwarfs China’s, at $17.4 trillion to $10.4 trillion.”
And yes, PPP is taking into account the fact that cost of living in China is way lower than in the US. Because, ultimately, the nominal GDP measure comparison is not fair – if you pay $1000 for a service in both countries, you can get a lot more for that in China than in the US. If we’re thinking about the amount of stuff that GDP can purchase in either country, then PPP makes more sense. Nominal GDP measures simply assume everything has international prices, that dollars in Chile and Venezuela are comparable because, for example, gas costs the same in both countries.
Let’s do a quick comparison. GDP per capita in nominal terms in Venezuela in 2013 was $7,576, placing it at No. 76 in the world, below Colombia. But in terms of PPP, taking into account the fact that you could get free Cadivi dollars and gas for free, the GDP per capita was actually $18,453, ranked at number 63, similar to Panama and Turkey. Clearly both measures are capturing different things, but they are both significant.
See? We’re quibbling!
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US GDP is 16 Trillion not Billion.
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Only in terms of absolute GDP size, JC. There’s a huge discussion going on about that, but whether China becomes the world’s most powerful economy depends on so many other things and remains to be seen
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“Powerful” is obviously a subjective appreciation, but let’s not kid ourselves here.
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It was always highly unlikely that the United States with less than 5% of the world’s population could continue to maintain the world’s largest economy. But, you are correct. This is a mile-stone for the world.
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A couple of unrelated thoughts to add to the mix: (1) where would we all have been, in the aftermath of the 2008 meltdown of global capitalism, without the economic growth provided by the spurt that took China to where it is today? (2) I don’t think the Chinese century is here … it will no doubt come at some point, by which time (let us fervently hope) the Chinese will be free to read Caracas Chronicles; in the meantime, China is an economic power but not a global military power, nor does it possess the ‘soft power’ needed to become the world’s leading civilization.
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Amen! Good point on the soft power. How many non-native Chinese speakers do you all know? 3, 4, 5? And how many non-native English speakers? Everyone on this blog, almost? How many Chinese music acts do you listen to?
So far, China’s cultural exports are Chinese food and ping-pong, maybe (don’t come to me with gunpowder and paper and historical artifacts). That’ll stay that way for a while. It’s changing, sure, but slowly.
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Ping Pong was invented in England (Table Tennis).
The Chinese just learned to love it so much that Mao even had tables dragged around with them on the Long March.
The main Chinese cultural export is its fifth column, which has colonized any town of any size around the world. Even Chinese checkers was invented in Germany.
Perhaps Go and Mah Jong can be added to General Tso’s chicken
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Pasta? Gunpowder?
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As well as the ecigarette.
None of the three are really culturally soft power, while all of the three are certainly Chinese inventions, Soft power is usually considered by its influences, Britain did not invent Rock and Rock, but how many kids have worn the UnionJack on a Beatles, Rolling Stones, Iron Maiden, etc. Tshirt. The prevalence of baseball in Venezuela would be cultural or soft power of the US, so would McDonalds. China does not have an international iconic brand like McDonalds.
The Chinese lifestyle has not been replicated around the world (except in food). At the same time look around you at the baseball cap and bluejeans, tennis sneakers and t shirt that everyone is wearing. These were uniquely US products that are now the norm worldwide.
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I am not so sure about Chinese’s “lifestyle”. What is that supposed to be? Exclusively the kind of things people wear? Look at Eastern Asia and you will see China has influenced cultures from Indonesia to Japan.
Chinese culture greatly fascinated Europeans in the XVIII and XIX centuries and from there you have all the Chinese pavillions.
And then http://www.standaard.be/cnt/dmf20141008_01310505
No, I am not saying China already has a secure place at the top or so, but if Greek culture was still the reference in the Mediterranean in the I Century BC, the Romans were already calling the shots.
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I find the link to Slovenian corruption confusing.
I have no doubt about Chinese past glories and future achievements.
Your children are not playing Chinese sports, wearing Chinese style clothes, listening to Chinese music,etc.
Your children may know Greek Gods and stories, but they have not read a book by a Chinese author.
Greece is still the basis of The Western society.
Kung Fu movies and martial arts may be other Chinese cultural icons.
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Charlie, it really depends where you live. Where I live, if you own a house on a cul-de-sac and put it on the market, it will not sell, because there is nowhere for the spirits to pass through. Chinese new year is a big deal, and if you go to your kids’ school concert, chances are you will hear Chinese music on the program. My old high school is 70-80% Chinese, I am told. It is situated on the back of the dragon, whatever that means. A good won ton will have people lined up out the door. Middle aged white guys were doing tai chi in the park where I was hanging out last weekend, the local Cineplex has movies in Chinese and yes, ping pong is hot, dragon boat racing has supplemented pot smoking as the thing for teenagers to do, and guay lo like me are enrolling their kids in language courses. It here, and we are either going to get with the program, or be cleaning European luxury cars for a living.
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you might want to add that you live on Canada’s Pacific Rim, both literally and trade-wise.
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Yeah but my heart is still at Spadina and Dundas. Delicious BBQ dead stuff hanging in steamed up windows….oldies playing mah jong at the lavanderia…gang hits on College street….you know what I’m talking about!
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yup, but let’s be clear: at a sifrinoidal distance. Meaning, my heart can only take so much.
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Gotcha. I drew the limits at chicken feet and durian fruit…until I found out Venezuelans eat chicken feet!!
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That’s amazing, Canucklehead. I had to read the sentence about the cul-de-sac twice before getting the point about feng shui.
That makes a lot of sense. I lived in Southeast Asia for a number of years and Chinese influence even at the turn of this century was strong – but even then it was mostly a American culture that set the scene where I happened to live and in most places I visited.
Pray tell, what in the world is dragon boat racing? It sounds like a euphemism for something reckless (and fun?).
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Dragon boat is a long, narrow, wooden canoe with Chinese stuff painted on it that fits maybe 15 rowers who wear bandanas and shout a lot. It is hugely popular here, probably because of the beer that comes after sweating a lot. Shing tao beer that is. It has nothing to do with “chasing the dragon”, which is another common pursuit out here, imported from Hong Kong as I understand it, which is highly reckless and will eventually leave you dead or in jail.
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And tai chi, and Taoism, and mah-jong, and kung fu movies (impact comparable to the Hollywood Western)…
China’s impact on world culture is just starting. It has been only one generation since China shook off the brain freeze of Maoism. In another generation, Chinese designers, authors, musicians, and filmmakers will become a major part of world culture.
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You get your economy news from the Huff post? and are incapable of interpreting them correctly? What a jerk!
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It actually comes from the IMF. And … how did I interpret them incorrectly?
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You’re reading a blog? How lowbrow of you.
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Nothing says gentrification like slumming pretenders. I’d buy share in CC right about now.
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It’s a symbolic moment, nothing more. The preceding century was American because of a whole host of reasons, one of which they were the largest-ish economy, but also because they were the leaders in technology and had an enourmous amount of soft power, backed up by a powerful miltary force projection and an even more powerful alliance.
China now has one component which made the preceding century American. Arguably it’s the least important of them all.
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I’m not convinced that it will last; not at least without some earth shattering adjustments. And given the vast numbers of empty houses around me with Chinese owners, I am probably not alone in that thought. The enchufados over there all have one foot in the land of lead-in-your-milk-and-arsenic-in-your-honey, and one foot in a pluralistic, open, rule of law, Western democracy.
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And melamine in the milk
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Purchasing power according to official sources means nothing without freedom:
https://www.es.amnesty.org/noticias/noticias/articulo/mujer-china-condenada-a-un-ano-en-un-campo-de-trabajo-por-usar-twitter/
maburro’s got a full snout of spewing that the only official dollar is 6,3, so venezuelan people have purchasing power ranging from 690 dollars per month.
Also, check what seems to be the chavista’s wet dream here:
“La reeducación por el trabajo es una sanción administrativa que puede privar de libertad a una persona durante un máximo de cuatro años por decisión de la policía, sin que sea juzgada por un tribunal de justicia independiente. ”
“The reeducation through labor (RTL) is an administrative sanction that can detain a person for up to four years for police decision, without being judged by an independent court of law.”
Concentration camps? Gulags anyone?
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I think this is one step on a long path and there are a lot of potential pitfalls along the way.
China is an amazing place and it has made huge strides forward in the last forty years…but it isn’t there yet.
From my experiences with our Chinese clients and travels there, I do see some significant issues that China will have to overcome before that GDP growth will endure long-term. My top 10.
1). Making it past the middle-income trap. China needs to transition to a service economy from its current export-driven model and expand its domestic markets.
2). Limited natural resources (aside from rare earths) create limitations based on availability. This is the reason both for its acquisitiveness in resource rich countries and relatively pacific foreign policy, with the exclusion of rumblings in the resource rich territorial waters.
3). Disparity issues. There are two Chinas, the coastal “modern” China and everywhere else. China’s “diaosi” is estimated between 500-700 million. Part of this is because of geography, part of it demographics. Despite all the glitter on the coast, you don’t have to go far to see truly poor China.
4). “Western” influence (including their hunger for luxury brands) will continue to put pressure on the government to open up, as will increased incomes and the inequality from #3, all of which may push towards civil unrest as recently seen in eastern China and Hong Kong.
5). Related to the above, China is turning itself into a toxic waste dump in the name of growth; at some point the people are not going to tolerate the hazardous environmental conditions. (On my last trip, I had a request to bring a very expensive compact air filtration system as a “gift”.)
6). Back to demographics referenced above, they have a huge headache coming as the population ages and both gender and worker-to-beneficiary ratios shift.
7). As incomes grow due to China’s economic growth, regardless of model, China loses its comparative advantage in production, which may slow growth if they don’t transition to more of a domestic service based economy (from #1). This is already happening to some extent with Vietnam and others in the region.
8). Financial system, corruption and transparency. The first is still decades behind the other, partially because of the latter two and partially because it serves China to control its capital disbursement. That’s why the rmb hasn’t moved forward as a reserve currency and is unlikely to do so for the next 20 years.
9.) Along with that, the case from a yuan-reserve isn’t helped by the government’s manipulation of its currency, which should they ever free-float, it will impact #7 as well.
10). SOE champions aren’t as effective as they could be, partially because of the Chinese love of bureaucracy. This also hampers small/medium sized firms and, more importantly, innovation in which they lag far behind the rest of the world, given their economic position and population.
Don’t get me wrong, I’m a big fan of China. But they have a lot to fix to really become the big dog on the world stage and I think internal pressures are more likely to slow them than anything else.
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The last 145 years have been an anomaly, we’re reverting back to the norm: http://www.quora.com/Economic-History/At-what-point-did-the-US-become-the-biggest-economy-in-the-world
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To be fair to the Chinese, for most of the history of human civilization, China was the most technologically advanced civilization in the world. The Western World only leaped into prominence after the European Renaissance. It just so happened that when the Europeans began building their trading empires based on advanced ship building technology, Chinese culture was at a low ebb, following the collapse of the Ming Dynasty.
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I agree with Juan, this is a big breakthrough. In fact, the PPP vs nominal discussion is irrelevant. China will still surpass the US in dollar terms within the next 5 years or so. The 17tn (US) vs 10tn (China) comparison is misleading if you don’t consider growth, inflation and renminbi appreciation. Even if growth in China ‘collapses’ to say 4-5%, inflation and RMB appreciation would do the trick in the early 2020s.
http://www.el-nacional.com/opinion/China-Gran-Transferencia_0_470953045.html
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